THE GOVERNORS AND THE POOR

January 4, 1991

THE GOVERNORS say they're hurting. In more than half the states, all of which are obliged to balance their budgets, projected revenues won't cover projected costs. The weakening economy is the proximate villain, but not the only one. Its main effect is on revenues, but state officials face rising costs as well. They point in particular to Medicaid, the federal-state health care program for the poor and, within Medicaid, to acts of Congress in recent years requiring them to expand coverage so that more of the poor and poor children especially are covered. Fewer than half the poor are covered now.

It's true that Medicaid (and prison) costs have lately eaten up much of the marginal money in state budgets. Medicaid consumed only 3 percent of state operating budgets in 1970, five years after it was begun. Today, it is 12 to 14 percent. In almost every state it is easily the fastest-rising major cost. The Congressional Budget Office estimates that in the current fiscal year Medicaid expenditures will rise 20 percent, and some state budget analysts think it will be closer to 25.

But the governors don't want to oppose the expansion of Medicaid any more than they want or feel able to pay for it. To suggest that this is just another example of congressional generosity at state expense doesn't do the problem justice. The federal government pays more than half of Medicaid costs. In requiring that the states do more, the federal government was shouldering more itself. The so-called mandates of recent years are said by congressional aides to account for perhaps only a fifth of the increase in Medicaid costs.

What is really driving the program is not Congress but need. In the last two years particularly, caseloads and spending have begun to rise in all the major open-ended programs for the poor. In fiscal 1989, 18.9 million households a month were on food stamps. This year, analysts estimate, it will be well over 20 million. Costs, in this case all federal, have gone up accordingly. The same has been true of Aid to Families with Dependent Children. The caseload, which averaged 3.77 million families a month in fiscal 1989, is now in excess of 4 million.

No one knows all the reasons, but one has plainly been a weak economy. Nor are most of these costs avoidable. If Medicaid is not expanded, uncompensated care will increase. The burden will be shifted back from government to providers (principally hospitals) that are already struggling, and the governors will have more of a different kind of problem. The alternative to not somehow financing care is writing people off. That is what the fiscal pressure on the states is ultimately about.